Opportunity Zone funds

[calmloki]

https://www.forbes.com/sites/anthon...nvesting-in-an-opportunity-zone/#308cf4f7d623

Anyone looking into this? Any offerings from Vanguard or the like you are aware of?

Short interpretation by me - so suspect - is that one could sell a property or stock and, unlike a 1031 exchange, invest in a not-like-kind thing. Also, unlike a 1031, only invest the depreciated equity and sale profit, keeping the undepreciated equity to play with. After periods of time 10% and then an extra 5% of the investment is tax free and after 10 years the increase in value of the investment is tax free. Oh - and the end of 2019 is going to mark the end of that last perk.
I'm looking at this as a way of divesting of rental property without giving the government any more of our money than necessary. Not a fan of investing in huge unknowns, especially with "Eddie's Opportunity, established 11/2018" or the like.

 

[RenoJay]

Just commenting so I get notified of responses. I’m pretty curious about this subject and am sitting on huge realized that cap gains from past two months.

 

[calmloki]

Marcus and Millichap, a real estate company, are offering a one hour webinar on opportunity zone investing on 11/27. You have to sign up for it but there may be some worthwhile information divulged. Pretty big dogs woofing around - this country mouse will be listening for hints we can use.

Was really hoping some of you savvy locals would chime in to tell why or why not on opportunity zone funds. Bueller? Bueller?

 

[BeachOrCity]

The regulations are just now being finalized. I would expect large numbers of funds to launch in 2019. There will be a LOT of dogs and the Opty to lose all the money you put into these things so Watch Out!

 

[calmloki]

The regulations are just now being finalized. I would expect large numbers of funds to launch in 2019. There will be a LOT of dogs and the Opty to lose all the money you put into these things so Watch Out!

My initial thought was that I could buy a place in an Opportunity Zone and take advantage that way - but it seems to be (reasonably) designed to bring new building or improvement into the depressed areas and require an OZ fund. Allegedly not too onerous to create your own fund, but I want simple. I read that the funds can get away with only investing 67% in the OZ, which gives them 33% to invest in a more profitable area. Still, I've already lost money putting it with a group rather than self shepherding it.

 

[RenoJay]

Still, I've already lost money putting it with a group rather than self shepherding it.

I've had similar experiences. I do a lot of hard money lending. No one I've ever lent to has ever missed a payment. But a good buddy of mine went to a conference of people who run hard money "funds" and pretty much all of them had gone belly up at one point or another.

The reason, I believe, is that the incentives are no aligned. Investors get attracted by glitzy headlines like, "earn 10% yields" or in the case of opportunity zones, "Shield your cap gains from taxes." Sounds great right? But then money rushes to these managers, who often get compensated a percentage of assets under management or some upside on the gain. But they never share the downside. Flush with funds, they end up making decisions that could pay off if everything goes great, but that could crash hard if not everything goes great. Heads they win, tails their investors lose.

Funds sounds very compelling....let someone else do the work and I get the benefit. But I've heard story after story of people who ended up losing money by pooling it in real estate investment funds that I personally will not do it even though I get tempted from time to time.